Facebook upgraded on mobile momentum

Mobile business, once seen as weakness, now seen growing strong

SAN FRANCISCO (MarketWatch) — Facebook Inc.’s mobile business, once regarded as a weakness, is increasingly being viewed as holding the potential to deliver formidable strength for the social-media giant.

This much was evident as Raymond James analyst Aaron Kessler raised his rating Monday on Facebook to outperform from market perform, citing “expectation for increasing monetization driven by mobile, new ad formats and international.”

Shares of Facebook, scheduled to report fourth-quarter financial results after the closing bell on Wednesday, traded up 3% to $32.47, after Sterne Agee analyst Arvind Bhatia reaffirmed a buy rating.

Both analysts cited Facebook’s mobile momentum — once referred to as “mobile mojo” by another analyst, after the company reported that 14% of its total ad revenues were now derived from its mobile business.

That was a big deal, since Facebook
FB, -0.19%
had been taking heat for not having a clear path to growing its mobile advertising.

That was a factor behind a disappointing initial public offering that became controversial last year. While the company’s stock has recovered of late, Facebook’s shares are still down 15% from its IPO price of $38 a share.

The shares’ recent jump — up nearly 50% in the last three months — is mainly due to rising optimism about its ad business, particularly its ability to make money out of its growing base of mobile users.

Who will snap up BlackBerry 10?

(3:05)

RIM no longer needs corporate customers for the bulk of its business, yet some of these clients are among its most loyal. (Photo: Getty Images)

Kessler underscored this in his note to clients, saying he now estimates mobile ads to make up about 26% of Facebook’s total ad revenue. For his part, Bhatia said he expects Facebook’s mobile revenue to grow by more than 75% from the previous quarter.

The analyst wrote that Facebook is “well positioned to benefit from two secular trends in advertising — the shift from offline to online advertising and the increasing importance of a social context in online advertising.”

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.